Building innovation through APIs

A software-to-software interface which connects businesses and opens up new revenue streams is reaping rewards for early adopters

There can be few organisations nowadays that don’t see data as fundamental to their business. But while there’s a natural tendency to think of this data as a private resource to be carefully guarded, organisations are increasingly reaping value from opening it up to the world.

Businesses such as Amazon allow third-party merchants to hook into their site, review sites use Google Maps to display nearby restaurants and websites of all types encourage users to share pages on Facebook.

Key to all this sharing is the application programming interface or API, which simplifies and standardises the way different applications hook up. And while these are effectively invisible to the end-user, they are central to most internet businesses.

An API is a set of programming instructions and standards for accessing a web-based software application or web tool. Using one, a third-party application can access an organisation’s data without the need for software to be written from scratch or for developers to have to share the whole of their software’s code.

Building blocks of the digital economy

This plug-and-play approach allows enterprises to create new marketing strategies, such as targeting customers through influencers rather than directly, and helps them move into different markets by creating new products and services from their assets, data or processes.

Holiday companies, for example, can automatically keep travel price comparison sites updated, boosting business for both. Meanwhile, telecom firms can provide APIs to enable developers and partners to build mobile and web applications based on their services.

APIs reframe strategy_nlUsing APIs can help organisations be more responsive and innovate more quickly. In many cases, organisations can charge for access, creating new revenue streams.

“For any company in any industry who wants to stay ahead of their competition, APIs should be at the forefront of their digital strategy. APIs allow businesses to easily and safely share their data and service through multiple apps, and can expose opportunities for businesses to enhance customer experience and create new digital services,” says Chet Kapoor, chief executive of API management company Apigee.

“For example, APIs can enable location-based mobile apps to have access to integrate information about entertainment, shopping, hotels and restaurants, providing customers with new levels of information and convenience.”

APIs are at the heart of supermarket Morrisons’ Match and More loyalty site and mobile app, which provides a price match guarantee against Aldi, Lidl, Tesco, Sainsbury’s and Asda.

The scheme requires the sharing of customer data, loyalty-card information, and both digital and physical vouchers with the supermarket’s partners, along with promotions and a live stream of personalised mobile offers when customers are in-store.

“Apigee has helped us to streamline digital and technology processes within Morrisons to allow the creative teams to concentrate on the experience rather than create disparate front-end systems for each activity,” says Tom Foster, the supermarket’s head of platform strategy and architecture. “This creates exciting new opportunities, as well as driving efficiencies, enabling us to swiftly enter the digital age in a well-managed way.”

Benefits of APIs

And there are extraordinary financial benefits to be gained. According to Apigee’s UK Digital Business Survey Snapshot, companies using APIs are eight times more likely to report increased revenue than those that deliver apps alone.

And while the overall median reported increase in revenue from successful digital initiatives is £487,000, this rockets to £9 million where APIs are involved.

Meanwhile, for Francis Hellyer, chief executive of online ticketing business London Theatre Direct, the biggest advantage of opening up the company’s APIs has been a huge reduction in administration.

Companies using APIs are eight times more likely to report increased revenue than those that deliver apps alone

The company was founded in 1999, but has moved on in recent years from a purely ticket agency business model to start offering selected partners direct access to London theatre by developing a full API solution with Tibco Mashery, as well as a business-to-business booking engine and a range of affiliate solutions.

Through APIs, it has opened up its booking platform, spanning London musicals, plays, ballet and opera, to numerous partners and channels, giving a seamless booking experience at any part of the customer journey.

“Our partners have access to pretty much everything we have as a business, so it’s very exciting to think what other partners can do,” says Mr Hellyer. “By allowing open access, we hope to get a faster uptake. If someone comes up with a really good idea for an app or a service, we can work with them very quickly.”

The system combines access to tickets from different services, and there’s great variation between the different contracts and agreements. “The way we charge depends on the type of partner and there are different levels of commission,” he says.

The company has recently added the ability to book New York Broadway shows to its range of services. And the next step, says Mr Hellyer, is to start including the ability to make travel bookings. “So we’ve added into the mix hotels, flights, entertainment and travel,” he says.

Staying ahead of the game

Organisations can future-proof their activities by using APIs internally too. Forrester Research says systematically implementing core business capabilities and assets as business APIs can help companies become much more responsive and enable rapid business reconfiguration.

“To stay ahead of the game in identifying which business APIs to build, connect API strategy to business architecture and specifically to its definitions of business capabilities and domains,” according to Forrester’s vice president and principal analyst Randy Heffner. “These form the basis for identifying major areas of business data, transactions, processes and events that are candidates to become business APIs.”

Organisations can identify their greatest assets in terms of data or applications and then recruit potential partners that can take advantage of them to create new services for customers. “Ground your API strategy in an understanding that innovation can come from anywhere,” says Mr Heffner.

It’s a rapidly growing trend, with Forrester predicting that this year will see a huge uptake in the use of APIs. US companies alone will spend nearly $3 billion on API management over the next five years, it predicts, and annual spend will quadruple to $660 million by the end of the decade.

And as they do so, says Nick Knupffer, director of international marketing for API management firm Tibco Mashery, business processes are becoming far more responsive.

“Fuelled by the proliferation of mobile applications, by delivering data where and when is needed,  APIs are slaying the usual business and technology boundaries to better reach and engage with customers, the workforce, and partner and supply chain access,” he says.

“By bringing services and information together in one place, and extending the brand potential accordingly, revenue streams are optimised creating new customer services and leveraging the intellectual property of a wider, integrated, fluid network.”

WHAT IS AN API?

APIs, or application programming interfaces, are seen as building blocks of the digital economy, enabling innovation, new products and offerings through a plug-and-play approach. Simply put, an API is a common interface for building software that allows two or more apps to communicate with one another and use each other’s functions, without the need for software to be written from scratch.

Using a basic example, an API allows computer users to cut information from one program and paste it into another. APIs also allow apps, such as Yelp and Uber, to display their services on a Google Map or enable BuzzFeed readers to share articles with their Facebook friends without even leaving the website.